As far as the Australian property market is concerned, the recession might as well have never happened.
At a national level the Australian property market appears to be doing well, despite the recession. The market’s seen ongoing sales and auction clearance rates, figures trending upwards towards pre-coronavirus levels.
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During the first week of November, CoreLogic reported 1,758 homes taken to auction across combined capitals, preliminary data showing a 73.2% clearance rate. While this is lower than the 2,412 homes to hit the hammer this time last year, data is trending in an upwards direction.
Further contributing to the uphill trend, in the week prior the preliminary clearance rate hit 77.0%, before being revised down to 71.0% at final figures. This was the highest preliminary figure since the week ending 1st March (77.1%).
Regionally, the market is also performing well. Regional housing values have been rising. CoreLogic reported values across the combined regional market increased 4.8% over 2020, compared to 3.7% across capitals.
The property data and analytics company, however, also noted that the higher performance of regional markets is necessarily an unusual pattern, given capital city markets are known for their volatility. It is not uncommon for capital cities to see higher returns in upswings lower declines in downswings.
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Confidence in the housing market is also rising. The Westpac Consumer Sentiment report for October showed a 10.6% rise in its ‘time to buy a dwelling’ index. It was the highest level recorded since September 2019.
Its key measure of house price expectations also increased 31.5%.
‘The national Index is now ‘only’ 17% below its pre-pandemic level and back around the level seen in July last year,” said Westpac chief economist, Bill Evans.
“There is clear optimism in smaller states – where housing has underperformed the major eastern states for several years – although the apparent resilience of the Victorian market is impressive.”
Angela Carrick, founder of property buying and management company Air Design Australia says she expects the momentum in the property market to continue.
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“Historically cuts to interest rates have fuelled housing market activity and generally aligned with upwards pressure on dwelling prices,” Ms Carrick told eChoice.
“If passed on by the banks, which is highly likely, we will see mortgage rates fall further from their already record lows. With the trend in housing values already rising around most areas of the country, there is a good chance lower rates could see momentum building across the nation.”
Despite current stimulus measures, Ms Carrick says it isn’t just first home buyer activity fuelling the market.
“… we find it is the self-funded retiree segment who feel the need to see increase in their investment portfolio with cash and super rates low,” she said.
“Changes to work-place arrangements and awareness around work-life benefits has seen an increase in the 40 plus age group investing in areas they may not have considered previously.”
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What does this mean for the future of the Australian housing market?
As far of the future of the Australian property market is concerned, the outlook remains uncertain.
Recently, insurance group QBE released its Australian Housing Outlook 2020 – 2023 report, authorised by Bis Oxford Economics. The report found despite the relative resilience of the Australian property market so far, future price drops are anticipated.
“Over 600,000 jobs have been lost since March, and the economy shrank by 7% in the June quarter. This challenging environment is likely to weigh on housing market activity and on prices,” the report said.
“Thus far the market has shown relative resilience, with a variety of government financial support packages for people and businesses, interest rate cuts and mortgage repayment deferrals helping to prevent a sharp market correction, but further price declines are expected.”
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The report predicts a varying future across capital cities. Sydney and Melbourne are both expected to underperform in the near term, due to their exposure to the economic damage caused by COVID-19. In contrast, the report believes Perth’s resilience to COVID-19 and the pick-up in mining sector construction activity will lead its market to outperform.
The Brisbane market is expected to remain affordable due to its oversupply of properties while Darwin is expected to see a modest correction from its previously weak market.
Adelaide and Canberra are both expected to see prices supported as COVID-19 recovery continues, due to their protected local economies and lack of housing supply.
The Hobart property market is expected to be relatively stable due to “contradictory pressures”. While the state is reliant on international tourists, the report said Tasmania’s recent population growth led to a tight supply of housing which will limit market contraction.
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Is it a good time to purchase property?
Gold Coast based buyer’s agent, Caleb Gray believes anytime is a good time to buy a property if it’s a long-term investment, though he also expects the market to loosen over the coming months.
“If you’re investing (or purchasing your home) for the long term then it’s always a great time to invest,” Mr Gray told eChoice.
“Given the current high demand of buyers compared to sellers, I would stress to would-be buyers that, if the perfect property comes up, then pounce on it quickly, however, if you keep getting beaten out or can’t find the right one, then don’t worry the market will loosen up over the coming months.”
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Mr Gray expects sellers to gain more confidence in the market in the coming months, creating more options for buyers, though he doesn’t anticipate the recently forecast ‘market crash’.
“JobKeeper and mortgage deferrals will wrap up and we will see an increase of stock that hits the market. However, I would not be expecting a property crash as many were predicting a couple of months ago.”
Words by Kathryn Lee
- CoreLogic Capital City Auction Statistics (Preliminary) Released 9 November 2020
- Westpac-Melbourne Institute Index of Consumer Sentiment October 2020
- Regional Housing Boom (CoreLogic)
- CoreLogic Capital City Auction Statistics (Preliminary) Released 2 November 2020
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